However, the company’s pace slowed considerably during the month of August — even after withstanding the recent troubles in the stock market.

While there are reasons to be optimistic about the firm’s prospects, there are also reasons to think Air Canada’s growth story may be coming to an end. Let’s see whether the Canadian airline giant is a stock worth investing in at the moment.

Air Transat acquisition 

Back in June, Air Canada and Air Transat — which is Canada’s third largest airline company — agreed to a merger that would see Air Canada buy Transat for $13 per share, which amounts to a valuation of about $520 million.

Despite looking relatively good on the surface, this agreement has been rocked by a string of negative press and bad news. First, many analysts argue that this acquisition goes against the interest of the consumers.

Air Transat is, after all, one of Air Canada’s main competitors, and the two companies even have a similar business model (they both offer low cost options), and their routes overlap somewhat significantly.

Though the firms originally claimed they would keep operating as separate entities, there is no guarantee that will be the case. Second, Air Canada had to raise its bid from $13 to $18 in August to shake off a bid a third party made to acquire Transat.

As we speak, the relevant authorities still haven’t given formal approval for the proposed takeover, and with consumer concerns on many people’s minds, it doesn’t seem like a forgone conclusion that approval will be granted.

Nevertheless, if this deal goes through, Air Canada will have another powerful growth engine at its disposal.

More reasons to worry

Here is some more bad news for Air Canada and for the airline industry as a whole: a recession might be on its way. The inverted yield curve — which was observed earlier this year — has preceded every major recession in the U.S. over the past few decades.

During a recession, consumer spending tends to drop, and the average person spends less on things like travel and vacations, which would obviously have an effect on airline companies. Further, Air Canada and its peers could also fall prey to volatile oil prices.

Cost of fuel accounts for the bulk of the spending of most major airline firms, which means the pricier it gets the lower their earnings, all else remaining equal. These headwinds could have a major impact on Air Canada moving forward.

The bottom line 

Air Canada has performed well year to date. The firm’s shares are up by about 66% since early January (at writing). However, the recent headwinds the firm has experienced — coupled with its stock price remaining flat since mid-August — might be an indicator that there is more trouble ahead for Air Canada. Though the airline company still looks relatively attractive, it might be best to wait and see how things develop.

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Decelerating growth 

To be clear, there are several facts and figures in BlackBerry’s financial results that seemed encouraging. The firm’s top line grew 22% year over year, and its software and services revenues — which is now BlackBerry’s largest segment — saw its revenues grow by 30% year over year. Further, more than 90% of the company’s revenues now come from recurring software services. When put in perspective, though, these results aren’t particularly impressive.

First, the tech firm’s software and services revenues actually declined sequentially. Although this was not a significant decline (about 2.5%), it is nevertheless noteworthy. Second, the year-over-year revenue increase of 22% was slightly below its 23% increase recorded in the first quarter. Again, that’s not a huge difference, but for a company that is supposed to be on an upward trajectory, it matters quite a bit. 

Perhaps most importantly, BlackBerry’s organic revenues actually declined slightly year over year. The company was able to record an apparently strong growth thanks to its Cylance acquisition. On that subject, it is also worth noting that Cylance’s revenue growth of 24% during this quarter was well below what the company had anticipated. In other words, things aren’t going the way BlackBerry expected them to. The firm’s guidance for the full year now predicts revenue growth in the 23-25% range compared to its previous expectations of 23-27% growth year over year. No wonder investors were unimpressed with BlackBerry’s results. The firm’s shares dropped by as much as 22% on the day its results were announced. 

Should you buy? 

On the one hand, there is still hope that BlackBerry’s new venture will prove to be fruitful in the future. After all, it is still very early in the company’s attempted turnaround. It wasn’t that long ago that BlackBerry was still known as a smartphone company, so investors should exercise patience. That being said, however, BlackBerry’s financial results have become less and less impressive.

Despite the firm making several major acquisitions, its core cybersecurity business as well as its Internet of Things segment seem to be struggling to take full flight. All of this spells trouble for the company. Sure, the fact that most of BlackBerry’s revenues come from recurring contracts is a strength, and the company will likely make more moves in the future to further improve its prospects. But all things considered, BlackBerry doesn’t seem particularly attractive at the moment. 

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Fortunately, more and more people are choosing to be a bit more adventurous in this regard, most notably by purchasing stocks to include in their TFSAs. But not all stocks should make it to your TFSA, and the recent performance of a stock shouldn’t be the main factor in whether you decide to include it in your savings account.

Case in point, one stock whose performance has been impressive in recent months that probably doesn’t belong in your TFSA is Lightspeed POS (TSX:LSPD). 

One of the hottest growth stocks on the TSX

Lightspeed became a publicly traded company in early March, and since then, the company’s share price has grown by about 75% (at writing). That is an impressive return in such little time, especially considering this period roughly coincides with equity markets slowing down somewhat significantly.

There are at least two main factors behind Lightspeed’s performance.

First, the company’s core operations seem very promising. Lightspeed provides several services to businesses within the restaurant industry, including point-of-sale (POS) systems, and e-commerce services.

Second, Lightspeed is likely to continue growing its revenue base significantly. After all, there is no shortage of potential small to midsize restaurants or retail businesses in need of the kinds of services the firm offers.

Lightspeed’s prospects seem compelling, but the company poses a danger for those looking for stocks to stash in their TFSAs. 

Why Lightspeed isn’t the best stock to put in your TFSA

Despite its recent performance on the market and its interesting prospects, Lightspeed isn’t yet consistently profitable. Sure, many businesses don’t make a single dollar in profit within the first few years of their operations, only to later become strong corporations. However, because of its financial situation, Lightspeed could suffer significant market losses if its revenue growth decelerate, or if the economy enters a recession.

In either case, this could translate to losses for those who choose to include the tech stock in their TFSAs. Much of the firm’s valuation at the moment relies on its perceived future success. Since no one can predict the future, it is best to include in your TFSA stocks of companies with more reasonable valuation metrics and that are overall less prone to volatility.

The bottom line 

Lightspeed is certainly a promising tech stock, and it might be worth considering purchasing its shares. However, it probably shouldn’t be on top of the list you craft when looking for stocks to hold in your TFSA for a long time. For that purpose, there are many other stocks you can buy. 

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First, several scandals have rocked the industry. Of course, the biggest one of them — and by far the most damaging — was the drama surrounding CannTrust Holdings.

Second, a lot of pundits have claimed that the cannabis bubble has finally burst. There may be some truth to this claim. In years past, we had nothing other than the perceived growth of marijuana sales worldwide underpinning much of our valuation of pot companies. But now that there is a significant amount of financial information available to investors, hopes and promises are no longer enough; they want results.

Cronos Group (TSX:CRON)(NASDAQ:CRON) has been one of the most disappointing pot firms in this regard. 

An inflated stock price

Cronos has a lot going its way, most notably its partnership with Altria. This partnership allows the firm to have access to a lot of cash with which to fund its operations but also to benefit from Altria’s vast experience. This factor was, without a doubt, one of the main engines behind the firm’s shares skyrocketing at the beginning of the year. Sure, equity markets were recovering from a slump, and many other marijuana companies were performing well, but few of them performed nearly as well as Cronos.

Between January and early March, the firm’s share price more than doubled. However, there was little by way of actual financial results that could justify this increase. When the results came in, analysts were left unimpressed, and investors were left sorely disappointed. 

To be fair, Cronos has delivered sequential top-line increases consistently; the firm’s revenues jumped from about $3.7 million in September of last year to $10.2 million in June. The firm’s latest revenues also came in three times higher than consensus analyst estimates. However, the company’s results (and future revenue estimates) lag that of its main competitors by quite a margin. Though Cronos delivered a net income in its latest reported quarter, this was mostly due to an accounting gain that had little to do with its core operations.

In other words, the firm’s bottom line wasn’t as impressive as it seemed at first. Given Cronos’s mixed results, it isn’t surprising that the company’s shares have fallen from their all-time highs, and despite the recent price correction, the company still trades at a hefty valuation. 

Why Cronos isn’t a buy right now

Cronos is in search of opportunities to improve its financial performance. The firm recently dipped its toes into the CBD segment and is also looking to be a major player in the market for vaporizers, which are gaining in popularity among recreational marijuana consumers. Despite these potentially lucrative opportunities, it would be best to keep an arm’s length away from Cronos for one simple reason: promises aren’t substitutes for results. Until the firm can deliver performances on par with its competitors, the cannabis company doesn’t look particularly attractive. 

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Truss beverages 

Hexo made a lot of noise earlier in the year. The firm acquired another marijuana company by the name of Newstrike Brands for $263 million. One of the motivating factors behind this acquisition was the fact that it would help Hexo increase its peak production capacity to about 150,000 kg per year. Also, Hexo holds a leading share of the cannabis market in Quebec. This is due to the company signing a five-year preferred supplier agreement to supply a total of about 200,000 kg of pot over the five-year period. This deal is the largest such provincial agreement to date, and it tips the balance in Hexo’s favor.

Despite these encouraging signs, the best argument for why Hexo is still worth considering is its partnership with beverage maker Molson Coors Brewing. The two firms penned a deal to start a joint venture to produce and sell cannabis-infused drinks. This venture goes by the name of Truss Beverages, and it represents an opportunity for Hexo to significantly improve its financial results. After a long and arduous wait, the cannabis derivative market will finally open in Canada, which means pot companies will be able to benefit from several high-margin opportunities. Hexo has been preparing for this for months. Its partnership with a firm of the caliber of Molson Coors — with its expertise in the industry, its distribution network, and its deep pockets — puts the Quebec-based marijuana company ahead of most of its peers. 

It is important to note that Hexo will be competing with none other than Canopy Growth in this market. After all, Canopy also has a partnership with a beverage maker. However, Hexo is planning to seek other avenues for growth. For instance, the firm is looking to enter the edibles segment by making gummies available to its customers, as the company’s CEO noted in a recent earnings call. Finally, Hexo is looking to dip its toes in the lucrative vaping market, which has been gaining steam recently and promises to be one of the liveliest in the cannabis derivative market.

The bottom line

Hexo is well positioned to profit from the launch of derivative products in Canada, which makes the firm worth considering, despite its recent struggles. Of course, a lot can still go wrong, but for those willing to take a little risk, Hexo might be one of the better options in the marijuana sector. 

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Enbridge 

Enbridge has encountered its share of headwinds in recent months. The energy firm ran into various regulatory obstacles that slowed the completion of one of its major growth projects, namely the Line 3 Pipeline Replacement Project. Enbridge stock also took a beating as a result, shedding a notable amount of its value between the months of May and August. Despite these issues, the Calgary-based firm is, without a doubt, a stock you want in your TFSA. First, Enbridge is one of the leading energy companies in North America, and the company is responsible for a staggering amount of the energy transport in both the U.S. and Canada. 

Second, Enbridge owns one of Canada’s largest gas-distribution companies, which adds to its sources of revenues. The firm’s latest financial results were a testament to its ability to perform well, despite challenges. Finally, there is no ignoring Enbridge’s high dividend yield — which currently sits at 6.95% — and its willingness to increase its dividends over the years. For all these reasons (and more), Enbridge should be at the top of your list if you are looking for dividends to hold in your TFSA. 

Emera 

Emera is a Canadian utilities giant, and the firm has performed well on the market so far this year. The company’s stock price has been on an upward trajectory and has increased by about 32% year to date (at writing). On the one hand, this means Emera isn’t as attractively valued as it was at the beginning of the year. But this shouldn’t stop investors from jumping aboard. Emera’s operations are geographically diverse, with several assets south of the border (including its lucrative and promising operations in the state of Florida), and even in the Caribbean. 

Further, the firm earns the majority (over 80%) of its revenues from its regulated business. This means that Emera is probably well equipped to handle an economic recession — which has been prophesied quite a lot lately — because its revenues would remain fairly stable and predictable even in an economic downturn. It is also worth noting that Emera sold several assets (somewhat) recently to decrease its risk exposure. Lastly, Emera’s dividend yield is currently 4.12%, and the firm vowed to increase its dividends by a compound annual growth rate of 4-5% through 2021. 

The bottom line

Both Enbridge and Emera possess strong operations, attractive growth prospects, and steady and growing dividends. Investors looking for dividend stocks to buy and hold for a long time — as well as build wealth in their TFSA — would do well to consider both Enbridge and Emera. 

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Despite this catastrophic performance, however, there might be hope for pot firms yet. In particular, two companies worth paying attention to over the next few months are Canopy Growth Corp (TSX:WEED)(NYSE:CGC) and CannTrust Holdings Inc (TSX:TRST)(NYSE:CTST).

Will Canopy dominate the derivative market? 

While Canada legalized recreational uses of marijuana in October of last year, derivative cannabis products — such as edibles and cannabis-infused drinks — are still illegal.

That won’t last much longer, though, as the relevant authorities will soon give the green light for these products and the market will be open for consumers to purchase them legally.

This obviously creates an immense opportunity for marijuana firms. Despite the growth of the recreational marijuana market, it doesn’t offer particularly high margins, and it risks suffering from a supply glut.

No surprise, then, that Canopy and its peers are eagerly anticipating the opening of the derivative market, which offers much higher margins.

The Ontario-based firm is in many ways, better equipped than most of its competitors to profit from this market, which means the company’s every moves will be scrutinized in the coming months as it tries to atone for its recent disappointing financial results.

Canopy’s partnership with Constellation Brands — and the cash it obtained from this deal — will be a powerful weapon to wield in this competitive market.

Of course, even the deadliest weapon is practically useless in the wrong arms. Similarly, Canopy will only succeed if it puts itself in a position to do so, which is why it will be important to keep an eye on what the marijuana company attempts to do to conquer this market.

Will the CannTrust scandal turn into an opportunity? 

At this point, there’s no doubt that most investors should stay far away from CannTrust. There probably isn’t a brand whose image has been damaged more than that of this Ontario-based grower in the entire cannabis sector.

By way of reminder, CannTrust was caught violating legal provisions for firms that engage in the cultivation, harvesting, or sale of cannabis. We recently learned that CannTrust will have its licence to produce and sell both medical and recreational marijuana suspended as a result of these violations. While this news is obviously bad for the company, investors should welcome this verdict.

The market despises uncertainty, and as long as Health Canada kept us in limbo as to what sanctions would be imposed on CannTrust, there was no telling how low the firm’s share price would go.

Now CannTrust can slowly try to put this episode in the rear view mirror, and although the road to redemption will be long and arduous, it is worth keeping an eye on the company.

After all, some of the factors that originally made CannTrust an interesting prospect could still play a role in its future, assuming there is a future for the firm.

The bottom line

Let’s not forget that the marijuana industry is still in its early stages. Many of the top cannabis firms aren’t too far removed from startup status. Naturally, there will be much risk and volatility moving forward.

Both Canopy Growth and CannTrust have had their struggles in recent months, but it might be worth keeping them on your radar and watching how things play out.

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Every story must come to an end, though, and with decelerating comparable sales growth in several quarters, many analysts predicted that the dollar store chain doesn’t have much left in the tank. Despite these warnings, there are several good reasons why Dollarama might not be done just yet. Here are two of those reasons. 

A recession might be on its way

Unless you have been living under a rock, you have probably heard that economists are increasingly worried that a recession is coming soon. The infamous inverted yield curve has preceded every single recession in the U.S. over the past few decades.

Once the reliable predictor of a coming economic meltdown was observed earlier this year, economists were left to draw the obvious conclusion. While nothing is set in stone yet, it is wise to take this potential warning into consideration when making your investment decisions. 

During an economic downturn, some companies perform better than others because of a shift in consumer spending, among other things. The average person is likely to spend less money and to turn to businesses that offer competitive prices for everyday items.

Obviously, Dollarama fits that description down to a tee. Thus, the firm might actually perform comparatively well if a recession hits. Of course, there are no guarantees in life, but it is worth keeping an eye on the Montreal-based company in these uncertain economic times. 

The Latin American market 

Back in July, Dollarama signed a deal to acquire a 50.1% stake in Dollarcity, a dollar store chain that operates in El Salvador, Columbia, and Guatemala. The deal was valued at about US$85 million to US$95 million. This acquisition is expected to add a few cents per share to Dollarama’s earnings for the remainder of the current fiscal year.

More importantly, it represents an attempt by the firm to keep its momentum going. The Latin American market presents strong opportunities for growth as its retail market is less competitive than that of Canada. The number of stores owned and operated by Dollarcity has increased rapidly in recent years, and it is expected to continue growing in the future.

As of late March, Dollarcity had 180 stores; that number should exceed 600 stores by 2029, according to the firm. 

The bottom line 

During its latest reported quarter — Q2 2019 — Dollarama saw its sales increase by 9.2% year over year, while comparable store sales grew by 5.2%, vastly outpacing the 2.6% comparable store sales growth in the same period of the previous fiscal year. Further, the firm’s earnings per share increased by 7.1%, and Dollarama grew the number of stores it owns by 6% year over year.

These figures — if a bit less impressive than those that helped the company grow to its current levels — aren’t as bad as advertised. Because of that and its Latin American operations, Dollarama might still have something to offer investors. 

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At this point, it is difficult to know which pot companies will become successful in the long run. One that I think presents weak prospects, though, is Namaste Technologies (TSXV:N). Namaste isn’t in the business of growing cannabis at all. The firm provides e-commerce online platforms to help cannabis distributors connect with their customers. Despite this rather interesting business model, below are two reasons why Namaste isn’t a buy right now. 

Online sales are lagging

Despite becoming legal late last year, sales of recreational marijuana started the current year a bit sluggish across most provinces and territories. Fortunately, business started picking up about mid-year or so. What is interesting about this trend, though, is the fact that there was one factor that was correlated with strong sales of cannabis products: the presence of brick-and-mortar stores. The rollout of physical stores played an important role in pushing sales of marijuana upward.

While we can’t make too much of this trend yet, this cannot be good for Namaste Technologies. The company’s success (or lack thereof) hinges on e-commerce style cannabis platforms being at least somewhat successful. If consumers overwhelmingly prefer shopping in physical stores, Namaste is in a world of trouble. Again, this trend may reverse in the future, but as things stand, it should be a stern warning to investors. 

Strong competition 

Namaste has sometimes been described as the Shopify of the cannabis industry. That moniker ignores that the Shopify of the cannabis industry may turn out to be Shopify itself. The tech giant started signing deals in the Canadian cannabis industry months before marijuana became legal. In February of last year, the Ontario Liquor Control Board (OLCB) announced a partnership with Shopify. The OLCB would use Shopify’s platforms to direct online sales of marijuana within Ontario. Shopify then signed a similar agreement with the province of British Columbia.

Further, the tech firm also inked deals with some of the largest pot firms, including Canopy Growth and Aurora Cannabis. Finally, Shopify possesses an asset Namaste doesn’t: strong brand recognition. If online sales of marijuana products become increasingly popular, Shopify would likely leverage its strong position within the e-commerce market and its already existing deals to acquire a notable share of the market. 

The bottom line

Namaste will be fighting an uphill battle in the coming months and years to remain relevant in the crowded cannabis industry. The firm may end up becoming one of the leaders in its segment, but as things stand, Namaste’s prospects do not seem attractive. 

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This development is just the latest in an ongoing transformation within the cannabis industry, which will yield billions of dollars in sales in just a few years.

For Canadian investors looking to profit from the U.S. cannabis market, one option to consider is Harvest Health & Recreation Inc (CNX:HARV). 

One of the largest footprints in the U.S.

One reason Harvest could be an attractive proposition is simply its multi-state presence and the number of stores it owns. As of late June, the vertically integrated cannabis company had the rights to about 210 facilities in the U.S., including 135 retail locations, across about 17 states.

While many other firms can boast a multi-state presence comparable to that of Harvest, none possesses the rights to nearly as many facilities. This factor makes Harvest — in its own words — a cannabis company with one of the largest and deepest footprints in the U.S. 

Harvest achieved its current position in the market largely by way of acquisitions. The latest of these — officially approved by the company’s shareholders during a meeting in June — was the acquisition of Verano Holdings Inc. Verano, one of the largest vertically integrated licensed operators of cannabis facilities, gave Harvest the rights to about 200 facilities across 16 states, including 123 dispensaries.

The all-stock transaction was valued at approximately USD$850,000,000. For a little while, this transaction was the largest acquisition in the U.S. cannabis market. 

Another significant acquisition Harvest made this year was its deal to acquire CannaPharmacy, Inc., a vertically integrated company that operates primarily in four eastern states, namely Maryland, Delaware, New Jersey, and Pennsylvania.

These acquisitions have prepared Harvest to handle the rise in demand for cannabis products better than most of its peers. The firm likely has access to more consumers than almost any of its competitors.

But how has Harvest performed so far?

Financial results

Last year, Harvest generated revenues of about USD $47 million, or about CAD $61 million, representing a 105% increase from 2017. The firm also posted a gross profit margin of 57%, although that was down about 3% from 2017.

The company’s net loss of about USD $67 million was a significant drop from its 2017 net profit of $USD $3,591,000. Harvest’s latest reported financial results, Q2 2019, showed that the company is making headway.

Its revenues of USD $26.6 million represented a 29% sequential increase. Further, Harvest is keeping its foot on the pedal as far as its expansion efforts are concerned.

The firm obtained more than $200 million in funding from a private investment firm and has already opened about half a dozen new retail locations in the third quarter. Finally, Harvest recently acquired the right to distribute its CBD products in more than 10,000 retail stores. 

The bottom line

While Harvest possesses the assets to rack up high sales and revenues for many years to come, it’s doubtful whether the company can earn substantial profits.

In particular, its profit margins have been decreasing, and the addition of all the facilities it acquired in its latest M&A will not make it easy to improve efficiency. In short, while it may be wise to keep an eye on the Vancouver-based company, it might not be the right time to pull the trigger just yet. 

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